It is espected that banks are to be allowed to revalue real estate assets

Q: In a move by Raghuram Rajan to release regulatory capital for banks has received a positive response from the market.

Chintakpujara, Mumbai

3rd February 2016

Real estate News in Mumbai

rbi governor raghuram rajan

raghuram rajan

revalue of real estate assets

release of regulatory capital for banks

central banks

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Replies (2)

Now you all want to know that what kind of assets could be revalued. Here are those banks which hold real estate where the value is not recognized anywhere and this could one of the items that could be revalued. Almost all public sector banks hold real estate with market value running into thousands of crore.

pradyumanapte, Mumbai

3rd February 2016

Comment

Hi Pradyuman,
You are absolutely right but orthodox accounting norms prevent this value from being recognized in the balance sheet of banks.

Alokesh Nandi, Kolkata

3rd February 2016

@Alokesh,
Thanks to a decline in share prices of private banks, many public sector undertakings banks showed gains. Bank of Baroda was the top gainer with a 2% gain at Rs 124. Other gainers were Punjab National Bank and State Bank of India which mildly recovered by 1.28% and 0.5% respectively. Federal Bank, Yes Bank, Axis Bank and HDFC Bank were among the private banks that were in the green. ICICI Bank continued to be a drag on the bank index with the share price declining by 1%.

pradyumanapte, Mumbai

3rd February 2016

That is why most of the private banks are falling last one months in stock markets. Many private banks have fallen up to 20-25% in couple of months.

In the past banks were allowed to revalue their real estate assets to strengthen their capital adequacy. But the revaluation reserves could be utilized only toward tier II capital and not as tier I capital which is at the bottom of the new capital adequacy norms under Basel III.

Shivshankar, Delhi-NCR

3rd February 2016

As per Raghuram Rajan's move, now the stocks of public sector banks increased in spite of investors being disappointed over the central bank's decision to hold policy rates.

Alokesh Nandi, Kolkata

3rd February 2016

Comment

Hi Alokesh,
Yes, and RBI Governor also said that the Central Bank's norms were stricter than global norms issued under Basel on recognizing assets that have increased the value. Now, they are looking at allowing banks to use a part of this as capital.

Shivshankar, Delhi-NCR

3rd February 2016